- 6 16 Gabby S Garage Issued A Bond With A 10 Year Maturity A 1 000 Par Value A 10 Percent Cou Pon Rate And Semiannua 1 (54.84 KiB) Viewed 26 times
6-16 Gabby's Garage issued a bond with a 10-year maturity, a $1,000 par value, a 10 percent cou- pon rate, and semiannua
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6-16 Gabby's Garage issued a bond with a 10-year maturity, a $1,000 par value, a 10 percent cou- pon rate, and semiannua
6-16 Gabby's Garage issued a bond with a 10-year maturity, a $1,000 par value, a 10 percent cou- pon rate, and semiannual interest payments. Two years after the bond was issued, the going rate of interest on similar-risk bonds fell to 6 percent. Suppose the market rate stays at this level for the remainder of the bond's life. Com- pute the (a) current yield and (b) capital gains yield that the bond will generate in the third year (Year 3) of its life.